Reaction to the potential 0.75% interest rate increase

CEO of RIFT Tax Refunds, Bradley Post, commented:

“Today’s decision will only add to the existing anxiety caused by the current cost of living crisis that has engulfed many households in recent months.

As a result, those who are already stretched financially thin are now facing a further squeeze on their monthly earnings, as the cost of everything from our mortgage repayments, overdrafts loans and credit cards is set to climb.

Unfortunately, there isn’t a great deal that can be done to ease these increased costs, other than tightening our belts where our borrowing habits are concerned.

Of course, for the vast majority, the belt simply can’t get any tighter, whilst many more have no other choice but to utilise overdrafts and credit cards simply to get by from one month to the next.”

CEO of Alliance Fund, Iain Crawford, commented:

“The mere suggestion of a three per cent base rate will be unheard of for many homeowners who have only known interest rates to sit below one per cent until very recently.

So they can be forgiven for feeling a tad dizzy at the prospect of what their mortgage is now likely to cost them, with the Bank of England not only implementing the largest single increase in over 33 years, but also pushing the base rate to its highest since November 2008.

Such a hike will also stun those who were currently in a position to buy, but are now likely to find that the cost of borrowing is no longer as affordable as it was. This will not only dampen their enthusiasm within the sales market in terms of the price they are willing to pay for a property, but it’s likely to keep many exiled within the rental sector for quite some time more.

So while the housing market may be in for a very rough ride over the coming months, it’s a safe bet that the rental market will be thriving.”

Director of Benham and Reeves, Marc von Grundherr, commented:

“Forget Halloween, it’s the Bank of England that has just delivered the fright of the year for the nation’s homebuyers with the biggest jump in interest rates in over three decades. Those on variable rate products can expect to see an immediate increase in their monthly payments, while those coming to the end of their fixed term can be suitably worried about what’s to come when they do remortgage.

This latest increase will also do little to revitalise the declining level of buyers entering the market, with many now finding they simply can’t afford the cost of borrowing compared to just a few short months ago.”

CEO of Octane Capital, Jonathan Samuels, commented:

“While the mortgage market has settled in recent weeks, today’s latest base rate hike will certainly sow more seeds of panic amongst the nation’s homebuyers and who can blame them after witnessing the largest single increase since 1989.

The average homebuyer opting for a variable rate mortgage can expect to see the cost of their monthly repayment increase by around £166 per month as a result of today’s increase.

Those currently coming to the end of a three year fixed mortgage will also see an increase as they look to secure another fixed term, with their monthly repayment increasing by an estimated £257 per month, despite having cleared a substantial chunk from their original loan.”

Managing Director of Barrows and Forrester, James Forrester, commented:

“The prolonged period of borrowing affordability that the nation’s homebuyers have basked in for some years is well and truly at an end. This latest, quite drastic hike, shows that the Bank of England have been asleep at the wheel for some time, awaking only now to the realisation that the economy is hurtling towards a sharp bend.

While we anticipate that the base rate will fall again come next year, we can expect market conditions to dampen over the coming months as buyers no longer have the purchasing power to pay the hefty property price premiums of the pandemic market boom, while sellers will remain stubborn in their expectations and refuse to adjust their asking price.

Whatever happens next, homebuyers need to wake up and smell the coffee, as high loan to value mortgages at low rates are now a thing of the past.”

Managing Director of HBB Solutions, Chris Hodgkinson, commented:

“We’ve already started to see the impact that a steady increase in interest rates has had in recent months, with chaos unfolding across the mortgage sector, while mortgage approvals have started to tumble, with house prices now following suit.

Well you ain’t seen nothing yet and today’s mammoth base rate jump is sure to prove the final nail in the coffin of the pandemic property market boom.

Buyers will now be treading with extreme caution and those looking to sell will find that they simply can’t secure the same price as they would have this time last year.”

Founding Director of Revolution Brokers, Almas Uddin, commented:

“Today’s increase may seem like a daunting one, but the good news is that the existing affordability criteria will ensure many borrowers are able to keep their head above water.

There may be times when the base rate and resulting cost of a mortgage exceeds these stress test thresholds, but should this happen it is likely to be short lived.

In any case, lenders are keen to work with their customers and will avoid repossessions at all costs as it’s in everyone’s interest to do so. Nobody wants to see an increase in forced sales that create misery and drag down the housing market even further.

For those worried about the increased cost of their mortgage, talk to your lender and for those approaching the end of a fixed term, start these conversations at least six months before so your lender can get you onto the cheapest fixed rate available.”